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Calix Ltd (ASX:CXL), an ASX industrial stocks, is experiencing a significant share price decline of 13% on Monday. In afternoon trading, the company's shares are trading at $2.45, approaching their 52-week low. The share price decline comes despite Calix's announcement of a binding and perpetual global license agreement along with a collaboration agreement. The agreement involves ASX CXL's 93%-owned subsidiary, Leilac, and Heirloom Carbon Technologies, a Direct Air Capture (DAC) company.
Details of the Agreement:
The agreement outlines an exclusive collaboration between Leilac and Heirloom for DAC applications. Leilac specializes in decarbonization solutions for the global cement and lime industry, utilizing technology to efficiently separate unavoidable carbon emissions for use or storage without the need for additional chemicals or processes. The terms of the agreement indicate that Leilac's technology will be utilized in all future Heirloom DAC facilities, subject to specific conditions and agreed-upon milestones.
Under the agreement, Leilac will receive a royalty based on the value of the captured CO2 using its technology. The royalty follows Leilac's standard licensing model, with rates tailored to the DAC application. The royalty includes a floor price set at the higher of US$3 per tonne of CO2 separated in a Leilac kiln or 3.5% of the prevailing CO2 price for lime decarbonization. Additionally, a variable royalty rate, based on the prevailing CO2 price or value minus the amortized cost of capital for the Leilac kiln per tonne of CO2 separated, applies when exceeding the floor price.
Reasons for the Share Price Decline:
While the announcement of a significant licensing agreement appears positive, investors have reacted by selling off Calix shares. The exact reasons for this decline are not entirely clear but could be attributed to the absence of a substantial upfront payment in the agreement. Investors may have also had different expectations regarding the floor prices for the technology.
Nevertheless, Calix's management expressed satisfaction with the agreement. Phil Hodgson, Calix's Managing Director and CEO, highlighted the significance of the partnership with Heirloom, opening new opportunities in a rapidly developing market. He emphasized that such collaborations and licensing arrangements are integral to their commercialization strategy, enabling the application of their core platform technology across multiple large markets.
Conclusion:
The 13% share price decline in Calix Ltd, following a licensing agreement with Heirloom Carbon Technologies, remains a puzzle to investors. While some may have expected different terms in the agreement, management views this collaboration as a strategic move that aligns with their commercialization strategy. The reasons behind the market's reaction to the agreement may become clearer as investors further analyze the details.
